FCC and AT&T Rural LTE Kerfuffle

A lot of ink has been spilled in the past week since AT&T withdrew its FCC application for a merger with T-Mobile and the FCC released a staff analysis report. AT&T’s Jim Cicconi took exception to FCC report’s assertion that AT&T would invest in rural LTE, and that Deutsche Telekom (parent company of T-Mobile) would invest in more US infrastructure. Both companies have clearly stated that, without the synergies of the merger, they have no intention of investing in rural LTE. Frequent AT&T critic Karl Bode blasted Cicconi’s comments arguing that AT&T simply doesn’t want spend the $3.8 billion deploying rural LTE, despite the fact that they have the money for it.

With all the arguing back and forth, some obvious facts are being ignored. Whether or not AT&T made the right bet by pursuing T-Mobile is irrelevant because it ignores the fact that the $4 billion penalty paid by AT&T that will not be going to rural LTE deployment. Deutsche Telekom, on the other hand, isn’t going to be laughing their way to the bank either because they stand to lose at least $12 billion on the failed merger bid. With T-Mobile profits dwindling and over half a million T-Mobile customers fleeing in 2011, it’s wishful thinking that Deutsche Telekom will invest more money in T-Mobile USA. Deutsche Telekom’s “exit strategy” can’t be made any clearer by the fact that T-Mobile is the only major carrier without the new iPhone 4S and the only major carrier without any intention of deploying LTE wireless.

The FCC staff report argued that competition from Verizon Wireless will compel AT&T to deploy rural LTE, but that’s speculation. Even a few years ago, when Verizon marketing blasted AT&T with their 3G coverage maps, AT&T did not respond by matching 3G coverage. Instead, AT&T focused on getting higher performance benchmarks in the urban and suburban markets. AT&T advertising focuses on a superior download speed theme. That strategy might be paying off, as independent tests from Metrico demonstrate that AT&T’s iPhone 4S is 3 to 5.5 times faster than Verizon or Sprint, making AT&T the most attractive carrier to iPhone buyers. And there is evidence to suggest that AT&T’s LTE network might be faster than Verizon LTE. With the loss of the T-Mobile merger, AT&T will almost certainly continue with a “speed over coverage” strategy, which could have negative consequences for rural broadband that the FCC is ignoring.